Oct

16

2013

Last Wednesday saw many investors focus on UK after several days of concentrating entirely on America. As the deadline for increasing the debt ceiling grows closer, focus will undoubtedly revert back to the US but, for now at least, positive data coming out of the UK has taken the tension out of the markets. The global outlook, however, remains relatively bleak and the emerging markets in particular are still struggling to create growth.

A Lack of Progress in the US

(UPDATE: an agreement is in place to fund the government and raise the debt ceiling]

In America, no progress has been made between Republicans and Democrats thus far and, as the 17th October deadline draws closer, an agreement is looking less and less likely between the two sides.

President Obama is still forwarding his idea for a ‘clean increase’ of a debt limit which means that no conditions are attached to the debt limit rising. Mr Boehner, however, insists on the fact that this is simply not possible as “it is not how government works”.

As we are now in the second week of the government shutdown it appears less and less likely that either side will budge significantly. As a result, the prospect of America completely defaulting on its debts is a real prospect. This is extremely worrying for governments the world over as an American default would lead to a global recession. The economic calendar, however, appears busy and there is still time for the situation to change drastically.

The Situation in the UK

In the UK, however, the news was much more positive as the IMF was forced into an ‘embarrassing about turn’. In April, the IMF had accused George Osborne of ‘playing with fire’ by enforcing yet more austerity on the UK economy. After singling him out for specific criticism back then, they upgraded the UK’s growth forecast by more than any other advanced economy only 6 months later.

The IMF now believes that Britain’s economy will grow by 1.4 percent this year (double the rate they projected in April). This comes as great news for the Chancellor of the Exchequer George Osborne who is currently planning the Conservative election strategy for the 2015 General Election- economic growth will greatly help his cause.

How Global Markets are Reacting

Across the rest of the globe, however, the IMF was less positive about the prospect of growth. Global growth was down to 2.9 percent from 3.2 percent three months ago. Emerging economies such as Brazil faced the largest downgrading and, as the debt crisis in America looms large, this is incredibly bad news.

To conclude, although the debt crisis in America still looms large, much of the focus of late has shifted back towards the UK’s growth in what is an embarrassing about turn for the IMF. Globally, however, the outlook still appears bleak as global growth has been revised down 0.3 percent over the past three months alone. Now, it looks likely that all eyes will turn back towards America as we enter the second week of the government shutdown.

Jan

30

2013

It was announced earlier in the week that Apple has lost its ranking as the most valuably publically traded company in the world. With the technology giant’s share prices plummeting, Exxon Mobil surged into pole position after a good performance last year. Apple may only be a few billion dollars behind the US oil company, but columnists all over the world seem to be suggesting that the California based brand has had its day.

The question then is whether or not this is an opportunity to go short on Apple, to leave it for dead, or to invest in the hope that its fortunes will change. To answer this question, we’ve got to look at competitors, and the reasons that Apple appears to be in decline.

It wasn’t that long ago that Apple seemed to be unstoppable. It had the best products available, a huge market share, and one of the best rated brands in the world. If analysts are to be believed, it is in decline for the very same reasons that its competitors lost out. Nokia, Research in Motion and a variety of other companies seemed to be at the top of the game, until they failed to notice changes in the technology market. The same has apparently happened to Apple, meaning rivals like Samsung are suddenly leading innovation and sales. Even Nokia are finding that their fortunes might be changing.

It seems that those who are writing off Apple as a company to invest in have very little faith in the brand’s ability to recover. There are others however, who realise that Apple’s power is not in its twilight; it is still one of the strongest companies in the world, with huge reserves to call upon. If there is any company that can turn its fortunes around, it is most certainly Apple.

There are a great many different strategies open to Apple, depending on where they believe they need to focus efforts. They are certainly going to go head to head with other technology giants such as Google when it comes to mobile operating systems, but Apple has the resources to ensure a high level of profitability.

The conclusion is that it seems far too early to write off Apple. Much of the current negativity is based upon just one quarter, and we’ve seen other huge companies such as Facebook, Amazon and Google suffer disappointing periods, only to recover.

Many investors will certainly have been scared off; there’s no avoiding that. Forex trading experts have even asserted that we could see risk aversion as a result of the company’s unexpected downturn, meaning investors move to havens such as the dollar and yen. For now at least, Apple is still worthy of investment, so much so that going short might only be worthwhile in the very short term. Only after a prolonged period of disappointment can the company really be regarded as past its prime.

Dec

12

2012

In the grand scheme of things, ETFs are relative newcomers to the financial world, but they are fast becoming a popular component to many investors’ portfolios. This is primarily because of the excellent diversity offered by these funds, but another attraction is their potential for excellent tax efficiency, and the fact that annual management fees are relatively low. This is especially true when you compare ETFs to mutual funds.

ETF Classification

One of the main factors that benefits ETFs is that they are generally classified as trusts, meaning the ETF is entirely its own entity; it is essentially an investment company in its own right, and therefore buying and selling the ETF is just like buying and selling another company.

The process of creation and redemption is what sets ETFs apart, and makes them particularly tax efficient. This procedure means that investors can avoid a considerable chunk of capital gains tax, by masking it in the creation and redemption process. ETFs are generally open ended funds, which means that authorized participants may trade assets in exchange for shares or vice versa.

What this means is that shares which were acquired at varying values, meaning there are some being held at profit and some at a loss, can be used to manipulate capital gains. Shares with a higher cost basis can be exchanged at a capital loss, which can neutralise unrealised gains, helping to avoid a good deal of capital gains.

The main point to consider is that when ETFs redeem their investor’s capital, they do so as an exchange, unlike mutual funds which do so in cash terms. Exchanges are not subject to tax, which is what makes ETFs so effective in this respect. Hiding capital gains is what this system is all about.

The key point to remember is that ETFs can fulfil investor redemptions without actually having to sell any securities.

ETFs vs. Mutual Funds

Of course, ETFs are not completely tax exempt, and it isn’t always possible to veil the capital gains through the creation and redemption process. This is the main component of an ETF’s operation however, so there is always scope for reducing tax.

When comparing mutual funds to ETFs, you’ll find that tracking identical indices can potentially yield 5% more of a tax burden, which could potentially mean thousands in lost profit on your typical sized portfolio. This does not include potentially higher management costs either.

ETFs Outside the US

In reality, ETFs are likely one of the most tax-efficient products on the US market, particularly when it comes to forex.

In the UK and other countries, ETFs are similarly popular, though they are not unique in their low tax. They also require offshore banking to fully take advantage of low taxation potential, due to corporation tax. Spread betting, classed as a form of gambling, is of course illegal in the US, but by the same token, is tax-free in the UK. Go to http://www.cmcmarkets.co.uk/spread-betting to find out more about spread betting if you reside in the UK. Please know it carries considerable risk.

If you file taxes online there are some great web-based software packages available that will help you sort through the maze of tax related investment decisions. I have found that TurboTax is the best.

Dec

03

2012

Forex has gained considerable popularity recently, as people have realised just how accessible it has become. For this reason, a great many people are turning to it as a method of investment. There are now thousands of individuals worldwide who make their living through investment in currencies, and similarly, people are putting some of their portfolios into forex too. The question is, does forex make sense in the long term?

What Do Most Traders Do?

The vast majority of traders do so short term. This is because this is the most profitable way of doing things to earn a regular income. The main reason however, is that one of the main forex strategies; the technical approach, is much easier to master on a short scale. Traders will monitor a variety of price charts, looking for patterns and signals which they believe indicate an ideal time to make a trade. These charts work far, far better for short term trading. With forex, a short term trade can be held for only minutes, and most spot trades i.e. simple buy or sell trades, will be closed within a day.

What Makes Long Term Trading Less Attractive?

Price movements over the long term are very hard to predict, and a lot of investors would argue that other options are better because they are easier. The flip side of course is that extremely large profits are entirely possible for those that believe they can speculate successfully. Spot trading can be difficult to profit from over a long period of time, because brokers will charge fees for every day the position is open. For this reason, options and futures are the preferred products for long term traders.

Forex tends to attract those who enjoy the thrill of making trades, and the constant price fluctuations mean that exciting and risky short term trades are more popular. Similarly, the fact that the markets are open for 24 hours a day for 5 days a week means that anyone can make small trades whenever they want, and see instant results. Constant monitoring is yet another reason short term trades are popular; brokers like Alpari even offer smartphone platforms.

Who Is Long Term Trading For?

To put things simply, long term forex investment is an advanced method of investment. It is best suited to those who already have a portfolio to work with, and are looking for another avenue to explore, because it is difficult to get immediate results. It can take time to find out whether an investment has been successful, by which point there may have been considerable expenditure in brokers fees. Long term forex trading is however, a favorite of hedge fund managers.

If you’re looking to get in to forex as a way of earning money quickly, then short term trading is definitely a better option. If however, you are looking to hedge some of your funds, then long term trading may be for you, if you’re willing to take the risks. Visit website to find out more about the trading strategies and options.

Jun

02

2011

The IPO market is really beginning to catch fire with the tech industry partying like it’s 1999. The party lights glowed and the DJ began spinning the beats before the LinkedIn (LNKD) IPO a couple weeks ago and the party will continue reaching a feverish pitch with a Groupon (GRPN) IPO. I mentioned in my blog post about the LinkedIn IPO that others would soon follow (particularly Groupon, Facebook and possibly Twitter) on the heels of the massive success of LinkedIn and that appears to be happening. Groupon announced today that it has filed for an IPO and hopes to raise $750 million. If the LinkedIn deal is any indication, the Chicago based daily deal company could raise well north of $1 billion in an IPO.

May

19

2011

Ok, maybe the title hints that there is going to be some secret underground tactic for how to trade the LinkedIn (LNKD) IPO, but the truth is that my secret underground tactic works for all IPO’s! Ha! It’s not the first time I’ve revealed my strategy for trading IPO’s, but considering the biggest IPO since Google began trading today (aka the Facebook of business networking), I thought it might be a good time to revisit the tactic.

When an IPO like this hits the market the knee jerk reaction is to want to jump in as soon as it begins trading for fear of missing out on the next big thing. Taking a look at the open today with the stock more than doubling in price and surpassing $100, it definitely appears “the fear of missing out” trade is on big time! Jumping in on that kind of trade can be a big mistake and can often lead to large losses.

Before I get into the trading tactics let’s take a look at why LinkedIn (LNKD) is generating such buzz. First of all, it’s the highest profile social networking site to hit the market which in all likelihood will have Facebook and Groupon wondering whether they should hit the public market sooner rather than later. I’m sure investors and execs at both companies are seeing the dollar signs. LinkedIn is no slouch in the social networking world, but is still dwarfed by Facebook in terms of number of users, revenue and profit. It’s dwarfed in terms of valuation too. Based on the secondary market, Facebook has now reached a stratospheric valuation of around $70 billion while Groupon is being valued in the $15 – $20 billion range. I believe at the current price, LinkedIn is approaching a $7 billion valuation.

LinkedIn counts just over 100 million users and doubled revenues in 2010 over 2009 to $243 million with a net income of $15.4 million. However, the company says it does not expect to be profitable on a GAAP basis for 2011 and is forecasting declining revenues and rising costs going forward (according to Reuters). For comparison sake, Facebook has more than 600 million users and reportedly earned $1.2 billion in revenue and $355 million in net income for the first nine months of 2010. Now you begin to see the kind of frenzy a Facebook IPO would generate if it were to go public too.

Many are beginning to question LinkedIn’s valuation as murmurs of another tech bubble begin to grow. Shares were priced at 17.5 times the company’s 2010 sales (that’s BEFORE today’s parabolic move). That compares with Google’s valuation of about six times. Is the move justified for a company that doesn’t expect GAAP profits this year or for a company that TheStreet.com says is becoming far less useful? Common sense would say absolutely not, but then again any of us who have been involved in the markets for some time knows that common sense and reality are often two sides of the coin. The “fear of missing out” trade can go on longer than we think. Does that mean you should jump on the bandwagon? In my humble opinion – NO.

That leads me to a discussion of how best to trade IPO’s, particularly an IPO that has soared out of the gates. In a nutshell, the best strategy is to WAIT. You want to see where this thing settles out, or more technically, where it forms its first base… a bullish triangle, a short base, a longer cup with handle or double bottom base. The hottest IPO’s often don’t base very long, but in my experience it’s best to wait at least two weeks from the open to get a feel of where resistance and support may be. After two weeks, I’ll revisit the LinkedIn IPO and post a chart with my analysis along with examples from the past. Good trading out there and do not chase this IPO!

Feb

14

2011

“Buy on the rumor, sell on the news” is an overused phrase in the investment community, but before an investor takes this advice to heart, he should also verify the sources and confirm the validity of the messages that he receives. This last part of prudent counsel often gets lost in the shuffle of buy and sell orders, but it may be the only protection that an investor has when it comes to detecting obvious stock manipulation techniques employed by those bent on deceit.

Stock manipulation is also a favorite topic of the “talking heads” on financial news channels. Fraud openly exists, despite the efforts of regulatory and law enforcement officials to stamp it out. A sad testimony to risk management efforts is that fraud can never be completely eliminated, but must be tolerated at an acceptable level as a cost of doing business. The forex market is, perhaps, the only market we have that is less prone to manipulative tactics due to its shear volume, now at $4 trillion a day and counting. Even the largest hedge funds with their sophisticated forex trading platforms or even central bankers are unable to artificially drive the market in one direction or another, though their efforts to do so are widely publicized.

Jan

14

2011

According to the WSJ, investment bankers are beginning to discuss proposals with Groupon for an IPO. Should Groupon go public this year it would likely be the most talked about IPO of the year (assuming Facebook holds off for another year). Groupon already turned down a $6 billion offer from Google which in my opinion was a big mistake but some value the company now at $15 billion so what do I know. It’s a great business model but with a low barrier to entry and I think Google will begin making a much bigger push in this space and have the infrastructure in place to do so. The company was rumored to be looking at an IPO in the fall, but is now looking like it could happen within a couple months. Considering the company just raised nearly $1 billion from big investors, there probably isn’t a need to rush an IPO, but at the same time the IPO environment is strong which may not be the case later this year. Anyone smell a bubble? Facebook $50 billion valuation, Groupon $15 billion, Twitter nearly $4 billion…

Dec

01

2010

It’s been awhile since I provide an update on gold, so I thought now would be a good time to take another look at the yellow stuff. In my last report on gold the GLD was inching closer to $130 and I thought that level would present a very difficult level and be an area where gold would stage a correction.

A few things to point out. For one, gold didn’t really correct, but rather digested overbought conditions with more of a sideways move (actually head and shoulders pattern) and remains in a fairly tight range above the $130 level, so certainly gold has held its own up here and could be poised for a move to the next major resistance level up around the $150 level (another 10% or so from current levels).

Read Entire Post “Gold Resting Before Push To 1500 Or About To Confirm Head & Shoulders Top?” Here